The business and culture of our digital lives, from the L.A. Times

Digital music royalties for songwriters left unchanged

October 2, 2008 | 5:03
pm

A sigh of relief could be heard in digital music land today as the federal Copyright Royalty Board left unchanged the rate for royalties paid to songwriters and publishers for CDs and digital downloads.

Today's ruling is the first time that the board formally set the digital download rate. Previously, because there was no formal rate for downloads, companies such as Apple had used the CD rate -- a 9.1-cent payment to the songwriter and/or publisher for every track sold through iTunes and other download stores. The board today also set a new rate of 24 cents for each ring tone, which had been independently negotiated.

The ruling comes as the music industry is in transition, with sales of CDs declining and digital sales increasing. In the last year, iTunes became the top music seller in the U.S., and other digital music stores opened such as Amazon.com and Rhapsody.

Last year, Apple, which typically sells a song for 99 cents, submitted a statement (PDF download, and it's 106 pages!) to the board suggesting that the company might shutter iTunes if the rate increased and Apple had to absorb the costs. Not many people in the industry thought Apple really would close its popular music store, but the company made its point loud and clear.

The National Music Publishers' Assn. had asked the board to increase the rate to 15 cents a song. But the Recording Industry Assn. of America, which represents the major record labels, and the Digital Media Assn., whose members include the likes of Apple, Amazon and Best Buy, had asked the board to cut the royalty rate and pay songwriters a percentage of the digital service's revenue. That was troublesome for the publishers association because many Internet music companies make little or no money.

"These events will bring clarity and order to an environment that for the past decade has been hampered by litigation and uncertainty on all sides," said David Israelite, president and chief executive of the publishers group. "In the end, songwriters and music publishers will have incentive to create and market music, and music fans will reap the rewards."

The other side rejoiced too. "No party got everything it wanted, yet at the end of the day, the certainty provided by this ruling is beneficial," said Mitch Bainwol, chairman and chief executive of the recording industry group.

"Keeping rates where they are will help digital services and retailers continue to innovate and grow for the next several years, which will benefit songwriters, artists, labels and publishers,” said Jonathan Potter, executive director of the Digital Media Assn.

The ruling comes a week after the same board settled disputes over interactive streaming and limited music downloads.

-- Michelle Quinn

Photo: A crowd at a music festival in Beijing last month. Credit: Michael Reynolds / EPA